Advertising and Conspicuous Consumption
AbstractThe paper formalizes the intuition that brands are consumed for image reasons and that advertising creates a brandâ€™s image. The key idea is that advertising informs the public of brand names and creates the possibility of conspicuous consumption by rendering brands a signalling device. In a price competition framework, we show that advertising increases consumersâ€™ willingness to pay and thus provide a foundation, based on optimization behavior, for persuasive approaches to advertising. Moreover, an incumbent might strategically overinvest in advertising to deter entry, there might be too much advertising, and competition might be socially undesirable.
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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 72.
Date of creation: Aug 2005
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-09 (All new papers)
- NEP-IND-2005-12-09 (Industrial Organization)
- NEP-MIC-2005-12-09 (Microeconomics)
- NEP-MKT-2005-12-09 (Marketing)
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